Market Overview

Prudential Financial, Inc. Announces Second Quarter 2018 Results

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Prudential Financial, Inc. (NYSE:PRU):

  • Net income attributable to Prudential Financial of $197 million or
    $0.46 per Common share versus $491 million or $1.12 per share for
    year-ago quarter.
  • After-tax adjusted operating income of $1.298 billion or $3.01 per
    Common share versus $919 million or $2.09 per share for year-ago
    quarter.
  • Notable items resulted in a net charge to net income and after-tax
    adjusted operating income of $81 million or $0.19 per Common share, as
    discussed later in this release. Net income also includes a net charge
    of $1.230 billion or $2.87 per Common share in our divested
    businesses, primarily driven by the impact of updated actuarial
    assumptions.

John Strangfeld, Chairman and CEO, commented on results:

"We are pleased with performance for the first half of the year with
an annualized adjusted operating return on equity above our 12-13%
target and positive growth metrics across our businesses. In the second
quarter we significantly strengthened the reserves of our divested
businesses, while maintaining a strong capital position. We returned
approximately $760 million to shareholders through dividends and share
repurchases in the quarter, and we expect to continue this robust level
of capital return through the year.

Looking ahead, we continue to invest in our businesses and our people
to broaden and deepen the value we bring to our retail and institutional
relationships. Our customer-centric business model enables us to deliver
innovative, integrated solutions, including financial wellness, across
individual and workplace customer segments, partnering in a way that
addresses the full picture of needs. Our employees are at the heart of
our purpose-driven culture, which aspires to unlock financial
opportunities for more people."

         
OTHER FINANCIAL HIGHLIGHTS

($ millions, except per share)

2Q:18     2Q:17
Book value per share of Common Stock $113.59     $111.73
Adjusted book value per share of Common Stock $92.60     $81.00
Common Stock share repurchases $375     $313
Common Stock dividends $382     $328
Parent company highly liquid assets $4,697     $3,651
   
         
NOTABLE ITEMS ($ millions, pre-tax) 2Q:18     2Q:17
Notable Items included in Adjusted Operating Income:        
Annual review and update of actuarial assumptions and other
refinements
$(160)     $(622)
Updated estimates of Individual Annuities profitability driven by
market performance versus assumptions
$(2)     $54
Returns on non-coupon investments and prepayment fees above /
(below) average expectations
$(10)     $55
Underwriting experience above / (below) average expectations $85     $80
(Higher) / lower than typical expenses $(15)     $(25)
Total Notable Adjusted Operating Income Items $(102)     $(458)
 

Prudential Financial, Inc. today reported second quarter results. Net
income attributable to Prudential Financial, Inc., was $197 million
($0.46 per Common share) for the second quarter of 2018, compared to
$491 million ($1.12 per Common share) for the second quarter of 2017.
After-tax adjusted operating income was $1,298 million ($3.01 per Common
share) for the second quarter of 2018, compared to $919 million ($2.09
per Common share) for the second quarter of 2017.

Consolidated adjusted operating income, adjusted book value and adjusted
operating return on equity are non-GAAP measures. These measures are
discussed later in this press release under "Forward-Looking Statements
and Non-GAAP Measures" and reconciliations to the most comparable GAAP
measures are provided in the tables that accompany this release.

RESULTS OF ONGOING OPERATIONS

The Company's ongoing operations include PGIM, U.S. Workplace Solutions,
U.S. Individual Solutions, International Insurance, and Corporate &
Other Operations. In the following business-level discussion, adjusted
operating income refers to pre-tax results.

PGIM

PGIM, the Company's global investment management businesses,
reported adjusted operating income of $254 million for the current
quarter, compared to $218 million in the year-ago quarter.

                 
PGIM ($ millions)         2Q:18     2Q:17
Adjusted operating income         $254     $218
           

The increase of $36 million from the year-ago quarter was driven by
higher asset management fees, reflecting an increase in assets under
management primarily from fixed income net inflows and equity market
appreciation, partially offset by higher expenses.

PGIM assets under management of $1.156 trillion includes a record-high
$611 billion of unaffiliated third-party institutional and retail assets
under management. Unaffiliated third-party net inflows, excluding money
market, totaled $7.3 billion for the current quarter driven by new and
existing institutional client mandates into fixed income and retail
fixed income flows.

U.S. Workplace Solutions

U.S. Workplace Solutions, consisting of the Retirement and Group
Insurance segments, reported adjusted operating income of $359 million
for the second quarter of 2018, compared to $444 million in the year-ago
quarter.

         
RETIREMENT SEGMENT ($ millions) 2Q:18     2Q:17
Adjusted operating income $277     $308
Notable items included above:        
Annual review and update of actuarial assumptions and other
refinements
$(68)     $(20)
Returns on non-coupon investments and prepayment fees above /
(below) average expectations
$(5)     $25
Underwriting experience above / (below) average expectations $60     $30
   

The Retirement segment reported adjusted operating income of $277
million for the current quarter, compared to $308 million in the
year-ago quarter. Excluding the notable items above, results increased
$17 million from the year-ago quarter reflecting a higher contribution
from net investment spread results and an increase in underwriting
income reflecting business growth, partially offset by higher expenses.

Retirement account values were a record high $433 billion as of June 30,
2018, up 8% from a year earlier, reflecting positive net flows and
market appreciation over the past four quarters. Net flows in the
current quarter totaled $2.8 billion with $1.2 billion from Full Service
and $1.6 billion from Institutional Investment Products, driven largely
by pension risk transfer flows.

           
GROUP INSURANCE SEGMENT ($ millions)   2Q:18     2Q:17
Adjusted operating income   $82     $136
Notable items included above:          
Annual review and update of actuarial assumptions and other
refinements
  $31     $55
Underwriting experience above / (below) average expectations   $10     $30
(Higher) / lower than typical expenses   $(15)     $0
     

The Group Insurance segment reported adjusted operating income of
$82 million in the current quarter, compared to $136 million in the
year-ago quarter. Excluding the notable items above, results increased
$5 million from the year-ago quarter reflecting an increase in
underwriting results, including business growth, partially offset by
higher expenses.

Group Insurance earned premiums, policy charges and fees of $1.2 billion
in the current quarter were up 5% from the year-ago quarter.

U.S. Individual Solutions

U.S. Individual Solutions, consisting of the Individual Annuities
and Individual Life segments, reported adjusted operating income of $550
million for the second quarter of 2018, compared to $55 million in the
year-ago quarter.

         
INDIVIDUAL ANNUITIES SEGMENT ($ millions) 2Q:18     2Q:17
Adjusted operating income $507     $612
Notable items included above:        
Annual review and update of actuarial assumptions and other
refinements
$10     $46
Impact from updated estimates of profitability driven by market
performance versus assumptions
$(2)     $54
Returns on non-coupon investments and prepayment fees above /
(below) average expectations
$(5)     $5
   

The Individual Annuities segment reported adjusted operating
income of $507 million in the current quarter, compared to $612 million
in the year-ago quarter. Excluding the notable items above, results
decreased $3 million from the year-ago quarter.

Individual Annuities account values were $164 billion as of June 30,
2018, roughly flat from a year earlier, as market appreciation offset
net outflows over the past four quarters. Individual Annuities gross
sales were $2.1 billion in the current quarter, up 37% from the year-ago
quarter, as customers have reacted favorably to pricing actions.

             
INDIVIDUAL LIFE SEGMENT ($ millions)     2Q:18     2Q:17
Adjusted operating income     $43     $(557)
Notable items included above:            
Annual review and update of actuarial assumptions and other
refinements
    $(55)     $(653)
Underwriting experience above / (below) average expectations     $(15)     $(10)
       

The Individual Life segment reported adjusted operating income of
$43 million for the current quarter, compared to a loss of $557 million
in the year-ago quarter. Excluding the notable items above, results
increased $7 million from the year-ago quarter reflecting lower expenses.

Individual Life sales of $142 million in the current quarter were down
7% from the year-ago quarter, reflecting lower guaranteed universal life
sales from prior year pricing actions partially offset by increases in
variable life sales.

International Insurance

International Insurance, consisting of Life Planner
Operations and Gibraltar Life & Other Operations, reported adjusted
operating income of $784 million for the second quarter of 2018,
compared to $823 million in the year-ago quarter.

         
LIFE PLANNER OPERATIONS ($ millions) 2Q:18     2Q:17
Adjusted operating income $376     $329
Notable items included above:        
Annual review and update of actuarial assumptions and other
refinements
$(49)     $(67)
Returns on non-coupon investments and prepayment fees above /
(below) average expectations
$(5)     $10
Underwriting experience above / (below) average expectations $10     $20
(Higher) / lower than typical expenses $0     $(25)
   

The Life Planner Operations reported adjusted operating income of
$376 million for the current quarter, compared to $329 million in the
year-ago quarter. Excluding the notable items above, results increased
$29 million from the year-ago quarter reflecting business growth,
partially offset by lower net investment spread results driven by low
interest rates in Japan.

Life Planner Operations constant dollar basis sales of $292 million in
the current quarter were down 17% from the year-ago quarter, primarily
reflecting accelerated sales in the year-ago quarter in advance of
premium rate increases on yen-based products partially offset by higher
sales of U.S. dollar-denominated products in our Japan operations.

         
GIBRALTAR LIFE & OTHER OPERATIONS ($ millions) 2Q:18     2Q:17
Adjusted operating income $408     $494
Notable items included above:        
Annual review and update of actuarial assumptions and other
refinements
$(32)     $21
Returns on non-coupon investments and prepayment fees above /
(below) average expectations
$5     $15
Underwriting experience above / (below) average expectations $20     $10
   

The Gibraltar Life & Other Operations reported adjusted
operating income of $408 million for the current quarter, compared to
$494 million in the year-ago quarter. Excluding the notable items above,
results decreased $33 million from the year-ago quarter reflecting a
shift in earnings seasonality resulting from the elimination of the
one-month reporting lag last quarter partially offset by business growth.

Gibraltar Life & Other Operations sales of $399 million in the current
quarter were down 3% from the year-ago quarter.

Corporate & Other Operations

Corporate & Other Operations reported a loss, on an adjusted
operating income basis, of $286 million in the second quarter of 2018,
compared to a loss of $312 million in the year-ago quarter.

             
CORPORATE & OTHER OPERATIONS ($ millions)     2Q:18     2Q:17
Adjusted operating income     $(286)     $(312)
Notable items included above:            
Annual review and update of actuarial assumptions and other
refinements
    $3     $(4)
       

Excluding the notable items above, the decreased loss of $19 million
from the year-ago quarter reflects lower net expenses in the current
quarter, including lower costs for employee benefit and compensation
plans tied to equity market returns, and higher income from the
qualified pension plan, partially offset by lower investment income net
of interest expense.

ASSETS UNDER MANAGEMENT

Assets under management amounted to $1.388 trillion at June 30,
2018, compared to $1.334 trillion a year earlier.

NET INCOME AND INVESTMENT PORTFOLIO

Net income attributable to Prudential Financial, Inc. amounted to
$197 million for the second quarter of 2018, compared to $491 million
for the year-ago quarter.

Current quarter net income includes $277 million of pre-tax net realized
investment gains and related charges and adjustments. The foregoing net
gains include pre-tax gains of $379 million primarily related to
derivatives used for risk management including foreign currency and
asset and liability duration management and other risk mitigation
activities, and net pre-tax gains of $90 million from general portfolio
and related activities. The foregoing gains were partially offset by net
pre-tax losses of $162 million from products that contain embedded
derivatives or guarantees and associated hedging activities, and $30
million from impairments and sales of credit-impaired investments.

Net income for the current quarter reflects a pre-tax decrease of $193
million in recorded asset values and a pre-tax decrease of $85 million
in recorded liabilities representing changes in value which are expected
to ultimately accrue to contractholders. These changes primarily
represent mark-to-market adjustments.

Net income for the current quarter also reflects a pre-tax loss of $1.6
billion from divested businesses, driven by the annual review of
actuarial assumptions in the Long-Term Care business, which included the
removal of the morbidity improvement assumption.

Net income for the year-ago quarter included $679 million of pre-tax net
realized investment losses and related charges and adjustments. The
foregoing net losses include pre-tax losses of $961 million from
products that contain embedded derivatives or guarantees and associated
derivative portfolios that are part of a hedging program related to the
risks of these products, largely driven by the impact of applying
tighter credit spreads to a higher gross GAAP liability for variable
annuity living benefits. The increase in the gross GAAP liability was
primarily due to lower interest rates. The year-ago quarter also
included pre-tax losses of $44 million from impairments and sales of
credit-impaired investments and $31 million primarily related to
derivatives used in risk management activities including foreign
currency and asset and liability duration management. The foregoing
losses were partially offset by pre-tax gains of $357 million from
general portfolio and related activities.

Excluding holdings of the Closed Block division, gross unrealized losses
on general account fixed maturity investments at June 30, 2018 amounted
to $4.5 billion, including $4.0 billion on high and highest quality
securities based on NAIC or equivalent ratings, and amounted to $1.5
billion at December 31, 2017. Net unrealized gains on these investments
amounted to $22.9 billion at June 30, 2018, compared to $32.0 billion at
December 31, 2017.

FORWARD-LOOKING STATEMENTS AND NON-GAAP MEASURES

Certain of the statements included in this release constitute
forward-looking statements within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995. Forward-looking statements are
made based on management's current expectations and beliefs concerning
future developments and their potential effects upon Prudential
Financial, Inc. and its subsidiaries. Prudential Financial, Inc.'s
actual results may differ, possibly materially, from expectations or
estimates reflected in such forward-looking statements. Certain
important factors that could cause actual results to differ, possibly
materially, from expectations or estimates reflected in such
forward-looking statements can be found in the "Risk Factors" and
"Forward-Looking Statements" sections included in Prudential Financial,
Inc.'s Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q.
Prudential Financial, Inc. does not undertake to update any particular
forward-looking statement included in this document.

Consolidated adjusted operating income, adjusted book value and adjusted
operating return on equity are non-GAAP measures. Reconciliations to the
most directly comparable GAAP measures are included in this release.

Adjusted operating income is the measure used by the Company to evaluate
segment performance and to allocate resources. Adjusted operating income
excludes "Realized investment gains (losses), net," as adjusted, and
related charges and adjustments. A significant element of realized
investment gains and losses are impairments and credit-related and
interest rate-related gains and losses. Impairments and losses from
sales of credit-impaired securities, the timing of which depends largely
on market credit cycles, can vary considerably across periods. The
timing of other sales that would result in gains or losses, such as
interest rate-related gains or losses, is largely subject to our
discretion and influenced by market opportunities as well as our tax and
capital profile.

Realized investment gains (losses) within certain of our businesses for
which such gains (losses) are a principal source of earnings, and those
associated with terminating hedges of foreign currency earnings and
current period yield adjustments are included in adjusted operating
income. Adjusted operating income generally excludes realized investment
gains and losses from products that contain embedded derivatives, and
from associated derivative portfolios that are part of an
asset-liability management program related to the risk of those
products. However, the effectiveness of our hedging program will
ultimately be reflected in adjusted operating income over time. Adjusted
operating income also excludes gains and losses from changes in value of
certain assets and liabilities relating to foreign currency exchange
movements that have been economically hedged or considered part of our
capital funding strategies for our international subsidiaries, as well
as gains and losses on certain investments that are designated as
trading. Additionally, adjusted operating income excludes the changes in
fair value of equity securities that are recorded in net income
beginning on January 1, 2018 as a result of the adoption of ASU 2016-01.

Adjusted operating income also excludes investment gains and losses on
assets supporting experience-rated contractholder liabilities and
changes in experience-rated contractholder liabilities due to asset
value changes, because these recorded changes in asset and liability
values are expected to ultimately accrue to contractholders. In
addition, adjusted operating income excludes the results of divested
businesses, which are not relevant to our ongoing operations.
Discontinued operations and earnings attributable to noncontrolling
interests, each of which is presented as a separate component of net
income under GAAP, are also excluded from adjusted operating income. The
tax effect associated with pre-tax adjusted operating income is based on
applicable IRS and foreign tax regulations inclusive of pertinent
adjustments.

Adjusted book value is calculated as total equity (GAAP book value)
excluding accumulated other comprehensive income (loss), the cumulative
effect of foreign currency exchange rate remeasurements and currency
translation adjustments corresponding to realized investment gains and
losses, and as of December 31, 2017 certain deferred taxes resulting
from the change in the U.S. tax rate enacted with the Tax Cuts and Jobs
Act. These items are excluded in order to highlight the book value
attributable to our core business operations separate from the portion
attributable to external and potentially volatile capital and currency
market conditions.

Adjusted operating return on equity is equal to the annualized
year-to-date after-tax adjusted operating income divided by the average
adjusted book value. Return on equity based on GAAP balances is
calculated using after-tax net income and equity.

We believe that our use of these non-GAAP measures helps investors
understand and evaluate the Company's performance and financial
position. The presentation of adjusted operating income as we measure it
for management purposes enhances the understanding of the results of
operations by highlighting the results from ongoing operations and the
underlying profitability of our businesses. Trends in the underlying
profitability of our businesses can be more clearly identified without
the fluctuating effects of the items described above. Adjusted book
value augments the understanding of our financial position by providing
a measure of net worth that is primarily attributable to our business
operations separate from the portion that is affected by capital and
currency market conditions, and by isolating the accounting impact
associated with insurance liabilities that are generally not marked to
market and the supporting investments that are marked to market through
accumulated other comprehensive income under GAAP. Adjusted return on
equity is a useful measure of the operating return the Company achieves
in relation to the capital available to our businesses. However, these
non-GAAP measures are not substitutes for income, equity and return on
equity determined in accordance with GAAP, and the adjustments made to
derive these measures are important to an understanding of our overall
results of operations and financial position. The schedules accompanying
this release provide reconciliations of non-GAAP measures with the
corresponding measures calculated using GAAP. The information referred
to above, as well as the risks of our businesses described in our Annual
Report on Form 10-K for the year ended December 31, 2017, and subsequent
Quarterly Reports on Form 10-Q, should be considered by readers when
reviewing forward-looking statements contained in this release.
Additional historic information relating to our financial performance is
located on our website at www.investor.prudential.com.

EARNINGS CONFERENCE CALL

Members of Prudential's senior management will host a conference call on
Thursday, August 2, 2018, at 11 a.m. ET, to discuss with the investment
community the Company's second quarter results. The conference call and
an accompanying slide presentation will be broadcast live over the
Company's Investor Relations website at www.investor.prudential.com.
Please log on 15 minutes early in the event necessary software needs to
be downloaded. The call will remain on the Investor Relations website
for replay through August 17. Institutional investors, analysts, and
other members of the professional financial community are invited to
listen to the call and participate in Q&A by dialing (877) 777-1971
(domestic callers) or (612) 332-0226 (international callers). All others
are encouraged to dial into the conference call in listen-only mode,
using the same numbers. To listen to a replay of the conference call
starting at 2 p.m. on August 2, through August 9, dial (800) 475-6701
(domestic callers) or (320) 365-3844 (international callers). The access
code for the replay is 439434.

Prudential Financial, Inc. (NYSE: PRU), a financial services leader with more than $1 trillion of
assets under management as of June 30, 2018, has operations in the
United States, Asia, Europe, and Latin America. Prudential's diverse and
talented employees are committed to helping individual and institutional
customers grow and protect their wealth through a variety of products
and services, including life insurance, annuities, retirement-related
services, mutual funds and investment management. In the U.S.,
Prudential's iconic Rock symbol has stood for strength, stability,
expertise and innovation for more than a century. For more information,
please visit news.prudential.com.

       
Financial Highlights
(in millions, unaudited)
 
Three Months Ended Six Months Ended
June 30 June 30
  2018     2017     2018     2017  
 
Income Statement Data:
Net income attributable to Prudential Financial, Inc. $ 197 $ 491 $ 1,560 $ 1,860
Income attributable to noncontrolling interests   3     5     4     8  
Net income   200     496     1,564     1,868  
Less: Earnings attributable to noncontrolling interests   3     5     4     8  
Income attributable to Prudential Financial, Inc.   197     491     1,560     1,860  
Less: Equity in earnings of operating joint ventures, net of taxes
and earnings attributable to noncontrolling interests
  15     8     37     30  
Income (after-tax) before equity in earnings of operating joint
ventures
  182     483     1,523     1,830  
Less: Reconciling Items:
Realized investment gains (losses), net, and related charges and
adjustments
277 (679 ) 341 (641 )
Investment gains (losses) on assets supporting experience-rated
contractholder liabilities, net
(193 ) 201 (596 ) 245
Change in experience-rated contractholder liabilities due to asset
value changes
85 (145 ) 503 (157 )
Divested businesses:
Closed Block Division (31 ) (18 ) (40 ) 16
Other divested businesses (1,526 ) 35 (1,598 ) 41
Equity in earnings of operating joint ventures and earnings
attributable to noncontrolling interests
  (23 )   (14 )   (49 )   (42 )
Total reconciling items, before income taxes   (1,411 )   (620 )   (1,439 )   (538 )
Less: Income taxes, not applicable to adjusted operating income   (295 )   (184 )   (324 )   (212 )
Total reconciling items, after income taxes   (1,116 )   (436 )   (1,115 )   (326 )
After-tax adjusted operating income (1)   1,298     919     2,638     2,156  
Income taxes, applicable to adjusted operating income   363     309     744     732  
Adjusted operating income before income taxes (1) $ 1,661   $ 1,228   $ 3,382   $ 2,888  
 

See footnotes on last page.

 
       
Financial Highlights
(in millions, except per share data, unaudited)
 
Three Months Ended Six Months Ended
June 30 June 30
  2018     2017     2018     2017  
 
Earnings per share of Common Stock (diluted):
 
Net income attributable to Prudential Financial, Inc. $ 0.46 $ 1.12 $ 3.62 $ 4.21
Less: Reconciling Items:
Realized investment gains (losses), net, and related charges and
adjustments
0.65 (1.55 ) 0.79 (1.46 )
Investment gains (losses) on assets supporting experience-rated
contractholder liabilities, net
(0.45 ) 0.46 (1.39 ) 0.56
Change in experience-rated contractholder liabilities due to asset
value changes
0.20 (0.33 ) 1.17 (0.36 )
Divested businesses:
Closed Block Division (0.07 ) (0.04 ) (0.09 ) 0.04
Other divested businesses (3.57 ) 0.08 (3.72 ) 0.09
Difference in earnings allocated to participating unvested
share-based payment awards
  0.02     0.01     0.03     0.01  
Total reconciling items, before income taxes (3.22 ) (1.37 ) (3.21 ) (1.12 )
Less: Income taxes, not applicable to adjusted operating income   (0.67 )   (0.40 )   (0.73 )   (0.45 )
Total reconciling items, after income taxes   (2.55 )   (0.97 )   (2.48 )   (0.67 )
After-tax adjusted operating income $ 3.01   $ 2.09   $ 6.10   $ 4.88  
 
Weighted average number of outstanding Common shares (basic)   419.5     428.3     420.8     429.1  
Weighted average number of outstanding Common shares (diluted)   428.0     437.2     429.5     438.1  
 
Earnings calculation, per share of Common Stock:
 
Net income attributable to Prudential Financial, Inc. $ 197 $ 491 $ 1,560 $ 1,860
Earnings related to interest, net of tax, on exchangeable surplus
notes
6 5 11 9
Less: Earnings allocated to participating unvested share-based
payment awards
  4     7     18     23  
Net income attributable to Prudential Financial, Inc. for
earnings per share of Common Stock calculation
$ 199   $ 489   $ 1,553   $ 1,846  
 
After-tax adjusted operating income (1) $ 1,298 $ 919 $ 2,638 $ 2,156
Earnings related to interest, net of tax, on exchangeable surplus
notes
6 5 11 9
Less: Earnings allocated to participating unvested share-based
payment awards
  14     11     30     26  
After-tax adjusted operating income for earnings per share of
Common Stock calculation (1)
$ 1,290   $ 913   $ 2,619   $ 2,139  
 
Prudential Financial, Inc. Equity (as of end of period):
 
GAAP book value (total PFI equity) at end of period (7) $ 48,232 $ 48,611
Less: Accumulated other comprehensive income (AOCI)   11,655     16,362  
GAAP book value excluding AOCI (7) 36,577 32,249
Less: Cumulative effect of foreign exchange rate remeasurement and
currency translation adjustments
corresponding to realized gains/losses   (2,650 )   (2,889 )
Adjusted book value (7) 39,227 35,138
 
Number of diluted shares at end of period (2)   429.0     433.8  
 
GAAP book value per Common share - diluted (3)(7) 113.59 111.73
GAAP book value excluding AOCI per share - diluted (4)(7) 86.43 74.34
Adjusted book value per Common share - diluted (4)(7) 92.60 81.00
 
Adjusted operating income before income taxes, by Segment (1):
PGIM $ 254   $ 218   $ 486   $ 414  
Total PGIM Division   254     218     486     414  
Retirement 277 308 594 705
Group Insurance   82     136     137     170  
Total U.S. Workplace Solutions Division   359     444     731     875  
Individual Annuities 507 612 1,026 1,080
Individual Life   43     (557 )   79     (439 )
Total U.S. Individual Solutions Division   550     55     1,105     641  
International Insurance   784     823     1,640     1,622  
Total International Insurance Division   784     823     1,640     1,622  
Corporate and Other operations   (286 )   (312 )   (580 )   (664 )
Adjusted operating income before income taxes   1,661     1,228     3,382     2,888  
Reconciling Items:
Realized investment gains (losses), net, and related charges and
adjustments
277 (679 ) 341 (641 )
Investment gains (losses) on assets supporting experience-rated
contractholder liabilities, net
(193 ) 201 (596 ) 245
Change in experience-rated contractholder liabilities due to asset
value changes
85 (145 ) 503 (157 )
Divested businesses:
Closed Block Division (31 ) (18 ) (40 ) 16
Other divested businesses (1,526 ) 35 (1,598 ) 41
Equity in earnings of operating joint ventures and earnings
attributable to noncontrolling interests
  (23 )   (14 )   (49 )   (42 )
Total reconciling items, before income taxes   (1,411 )   (620 )   (1,439 )   (538 )
Income before income taxes and equity in earnings of operating joint
ventures for Prudential Financial, Inc.
$ 250   $ 608   $ 1,943   $ 2,350  
 

See footnotes on last page.

 
       
Financial Highlights
(in millions, or as otherwise noted, unaudited)
 
 
Three Months Ended Six Months Ended
June 30 June 30
  2018     2017     2018     2017  
 
PGIM Division:
 
PGIM Segment:
Assets managed by PGIM (in billions, as of end of period):
Institutional customers $ 490.8 $ 461.2
Retail customers 252.0 231.2
General account   413.3     412.3  
Total PGIM $ 1,156.1   $ 1,104.7  
 
Institutional Customers - Assets Under Management (in billions):
Gross additions, other than money market $ 17.8   $ 17.2   $ 37.2   $ 33.1  
 
Net additions, other than money market $ 5.5   $ 6.5   $ 5.3   $ 7.0  
 
Retail Customers - Assets Under Management (in billions):
Gross additions, other than money market $ 13.4   $ 10.8   $ 28.0   $ 23.8  
 
Net additions, other than money market $ 1.8   $ 1.2   $ 2.8   $ 1.3  
 
U.S. Workplace Solutions Division:
 
Retirement Segment:
 
Full Service:
 
Deposits and sales $ 7,712   $ 4,771   $ 17,634   $ 11,507  
 
Net additions (withdrawals) $ 1,242   $ (1,015 ) $ 3,010   $ (969 )
 
Total account value at end of period $ 240,922   $ 214,731  
 
Institutional Investment Products:
 
Gross additions $ 5,461   $ 2,557   $ 6,149   $ 6,599  
 
Net additions (withdrawals) $ 1,610   $ (1,614 ) $ (2,591 ) $ (1,813 )
 
Total account value at end of period $ 191,722   $ 186,610  
 
Group Insurance Annualized New Business Premiums (5):
Group life $ 46 $ 56 $ 289 $ 242
Group disability   14     14     154     129  
Total $ 60   $ 70   $ 443   $ 371  
 
U.S. Individual Solutions Division:
 
Fixed and Variable Annuity Sales and Account Values:
Gross sales $ 2,067   $ 1,507   $ 3,791   $ 2,947  
 
Net redemptions $ (890 ) $ (900 ) $ (2,061 ) $ (1,813 )
 
Total account value at end of period $ 163,645   $ 162,694  
 
Individual Life Insurance Annualized New Business Premiums (5):
Term life $ 54 $ 54 $ 103 $ 103
Guaranteed Universal life 24 40 45 93
Other Universal life 29 33 55 54
Variable life   35     26     64     49  
Total $ 142   $ 153   $ 267   $ 299  
 
International Insurance Division:
 
International Insurance Annualized New Business Premiums (5)(6):
 
Actual exchange rate basis $ 695   $ 770   $ 1,453   $ 1,661  
 
Constant exchange rate basis $ 691   $ 766   $ 1,436   $ 1,660  
 

See footnotes on last page.

 
           
Financial Highlights
(in billions, as of end of period, unaudited)
 
Three Months Ended
June 30
2018 2017
 
Assets and Asset Under Management Information:
 
Total assets (7) $ 819.9 $ 812.8
 
Assets under management (at fair market value):
PGIM Division 1,156.1 1,104.7
U.S. Workplace Solutions Division 87.6 85.8
U.S. Individual Solutions Division 115.7 114.4
International Insurance Division   28.8   28.7
Total assets under management 1,388.2 1,333.6
Client assets under administration   228.7   188.3
Total assets under management and administration $ 1,616.9 $ 1,521.9
 
See footnotes on last page.
 
(1)   Adjusted operating income is a non-GAAP measure of performance. See
FORWARD-LOOKING STATEMENTS AND NON-GAAP MEASURES within the earnings
release for additional information. Adjusted operating income, when
presented at the segment level, is also a segment performance
measure. This segment performance measure, while not a traditional
U.S. GAAP measure, is required to be disclosed by U.S. GAAP in
accordance with FASB Accounting Standard Codification (ASC) 280 –
Segment Reporting. When presented by segment, we have prepared the
reconciliation of adjusted operating income to the corresponding
consolidated U.S. GAAP total in accordance with the disclosure
requirements as articulated in ASC 280.
 
(2) Diluted shares as of June 30, 2018 include 5.88 million shares due
to the dilutive impact of conversion of exchangeable surplus notes
("ESNs") when book value per common share (i.e., book value per
common share, book value excluding AOCI per share and adjusted book
value per common share) is greater than $85.00. Diluted shares as of
June 30, 2017 do not include shares related to ESNs due to the
antidilutive impact of conversion of ESNs when book value per common
share (i.e., book value excluding AOCI per share and adjusted book
value per common share) is less than $86.92.
 
(3) Reflecting the dilutive impact of ESNs when book value per common
share is greater than $85.00, to calculate book value per common
share as of June 30, 2018, equity is increased by $500 million and
diluted shares include 5.88 million shares. As of June 30, 2017,
book value per common share includes a $500 million increase in
equity and a 5.75 million increase in diluted shares, reflecting the
dilutive impact of ESNs when book value per common share is greater
than $86.92.
 
(4) The exchangeable surplus notes are subject to customary antidilution
adjustments and the exchange rate is accordingly revalued in the
fourth quarter of each year. Reflecting the dilutive impact of ESNs
when book value per common share is greater than $85.00, to
calculate book value excluding AOCI per share and adjusted book
value per common share as of June 30, 2018, equity is increased by
$500 million and diluted shares include 5.88 million shares. As of
June 30, 2017, the conversion of ESNs is antidilutive as book value
excluding AOCI per share and adjusted book value per common share is
less than $86.92.
 
(5) Premiums from new sales are expected to be collected over a one-year
period. Group insurance annualized new business premiums exclude new
premiums resulting from rate changes on existing policies, from
additional coverage issued under our Servicemembers' Group Life
Insurance contract, and from excess premiums on group universal life
insurance that build cash value but do not purchase face amounts.
Group insurance annualized new business premiums include premiums
from the takeover of claim liabilities. Excess (unscheduled) and
single premium business for the company's domestic individual life
and international insurance operations are included in annualized
new business premiums based on a 10% credit.
 
(6) Actual amounts reflect the impact of currency fluctuations. Constant
amounts reflect foreign denominated activity translated to U.S.
dollars at uniform exchange rates for all periods presented,
including Japanese yen 111 per U.S. dollar and Korean won 1,150 per
U.S. dollar. U.S. dollar-denominated activity is included based on
the amounts as transacted in U.S. dollars.
 
(7) In the first quarter of 2018, the Company eliminated the one-month
reporting lag for balance sheet and results of operations of
Gibraltar Life Insurance Company, Ltd. ("Gibraltar Life")
consolidated operations. As a result, prior period amounts include
an increase resulting from the elimination of Gibraltar Life's
one-month reporting lag.

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